Employment Today Magazine

The false promise of the gig economy

The ramifications of the gig economy go far beyond the erosion of workers’ rights, says entrepreneur and Perpetual Guardian founder Andrew Barnes. He has a message for his fellow employers.

To paraphrase a famous line about the Devil, one of the greatest tricks corporations ever pulled was persuading the masses that the gig economy represented a workers’ paradise: Work when you want, be your own boss, flexibility is king. It sounds irresistible, but let us look at how it is playing out in real life.

The gig economy as we understand it today has its roots in Silicon Valley, which is full of “unicorns” (companies with a market capitalisation of US$1 billion-plus) founded on technology and employing the best and brightest engineers to build software that dictates and controls the work of countless gig contractors.

Take Uber, worth an estimated US$72 billion, whose approach to gathering revenue and expanding its profit margin was illuminated by a former engineer in a September 2018 report for Vanity Fair. Susan Fowler writes of “a spate of lawsuits [that] has highlighted an alarming by-product of the gig economy—a class of workers who aren’t protected by labour laws, or eligible for benefits provided to the rest of the nation’s workforce”.

Fowler suggests that the rise of this unprotected class is more by design than accident, and to prove her point she recounts overhearing two fellow engineers laughing about a plan to manipulate bonuses in a way that would “trick” Uber drivers into working longer hours. As it stands, a July 2018 report found that 85 percent of New York City’s gig economy drivers are earning less than $17.22 an hour.

If we accept this as evidentiary, it does not look promising for workers. On the other hand, the gig economy is an American economic and labour construct—so what do its opportunities and dangers mean for the New Zealand workforce?

THE UNDOING OF WORKERS’ RIGHTS

For three days leading up to Christmas 2018, representatives of Air New Zealand and airline engineers and logistics workers held tense negotiations behind closed doors to resolve a dispute over pay and conditions and avert a three-day strike. Had mediation not worked, the result would have been chaotic disruption of travel for tens of thousands of people and the worse possible PR for Air New Zealand.

In a gig economy, there are no strikes, no negotiations and no improvements to worker conditions, because the employer has no incentive or legal obligation and the worker has no leverage. In a country where labour organisers and workers’ collectives have fought so hard for decades to steadily advance and entrench workers’ rights in legislation, it seems unwise, to put it mildly, to let it all go up in smoke for the sake of a convenient Uber Eats delivery.

THE RIPPLE EFFECT

The ramifications of the gig economy go far beyond the erosion of workers’ rights, however. For many workers, ongoing professional development is core to their career advancement, but in a gig economy, the employer has no obligation whatsoever to educate or develop their workforce.

Think about it—the biggest companies driving the gig economy are those that have disintermediated industries down to an almost assembly-line division of labour. Amazon wants its worker to deliver a parcel; does it need to invest in developing that worker’s skills? No, because the brief is very limited. (And soon enough, the worker will be replaced with a drone and even that limited gig will dry up.) Uber has its drivers out in force and is gathering rich data which it will ultimately use to run driverless cars: Thanks for playing.

It is a sobering picture, but I would be remiss not to address the argument many are making as to the upside of the gig economy. True, it promises flexibility and self-control of work that more and more people—from Millennials entering the workforce to busy workers in mid-life and superannuitants still in employment—are said to want. Perhaps the daily grind is more manageable when you are not doing an arduous commute to work standard weekday hours.

Again, let us review the data. The New World Order, a 2017 report by the Foundation for Young Australians, identified that one in three Australians are unemployed or underemployed; 70 percent of young people will enter the labour market in jobs that will be lost or automated; and one third of jobs created in Australia over the past 25 years have been in less secure temporary, part-time or self-employment.

A major conclusion of the report is that Australian workers are at risk of losing their social protections, such as minimum wage, insurance and leave entitlements.

Consider what this means: Less than a decade into the advent of the gig economy, the career trajectory of people coming into the Australian workforce has changed radically from that of the preceding generation.

The picture is the same in other developed countries. A University of Auckland analysis of a two-decade-long French study of 10,000 school university graduates found, in the words of Professor Elizabeth George, “that if you started off in one of these relative non-standard type of work arrangements, like temporary or contracts … the likelihood of you changing that was low. You were stuck”.

One explanation, she says, is that companies using temporary workers have no incentive to invest in them, and without new skills they cannot advance.

What’s more, the gig economy may be harmful to those it purports to benefit most—the corporations. According to The Economist, a recent paper out of the University of South Carolina found that keeping shifts consistent and allowing employees to swap shifts via a mobile app boosted sales at a Gap store by seven percent. The availability of jobs means that if people are scheduled “like widgets in a factory”, with no flexibility, it can lead to higher worker turnover, absenteeism and poor service, thus hurting revenue—and workers can simply “walk across the street to another retailer” who provides better conditions.

WHO PAYS?

As addressed by the FYA report, gig workers have no sick pay, no holiday pay, no redundancy entitlement and no mandated superannuation contribution by their temporary employer. So when they work themselves to the point of burn-out, or fall ill, or get old, and they have no savings to draw on because their various low-paid gigs have only just covered their high cost of living (especially in New Zealand, with its stratospheric housing costs)—who picks up the tab?

We all do. Unless we are willing to see our fellow Kiwis literally fall by the wayside, we are going to have to use the tax base to cover vastly increased costs in healthcare, entitlements such as superannuation, and other benefits. These projected rises are against an already-predicted backdrop of a 200+ percent increase in the cost of NZ Super, from a daily spend of $30 million in 2018 to $98 million a day in 20 years’ time.

Any economist would tell you the math is simple—if you need to spend more in some areas, you make cuts to other services; you sell assets; you borrow money; or you hike taxes and create new ones. If New Zealand is prepared to accept the gig economy in its current form, we will have to tolerate all that comes with it.

THE PRODUCTIVITY FIX

There is a solution. The eight-week productivity trial at my company, Perpetual Guardian, proved that companies can offer a key benefit of the gig economy—flexibility—while maintaining the status quo in other areas. We asked our 240 staff to work four standard days a week while achieving the same productivity as in their usual five, and they met the brief. In some teams, productivity even went up.

The researchers who followed the trial reported a host of positive outcomes, from increased motivation to better work-life balance, and the benefits for the business have been manifold. We introduced the four-day week on a long-term opt-in basis in November 2018.

To my fellow employers I issue a challenge: Do not sleepwalk into our new economy; take the lead on behalf of your workers, and watch your company flourish.

ANDREW BARNES is an entrepreneur and the founder of Perpetual Guardian.